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CHANGE IN RECOMMENDATION

COMPANY REPORT

EQUITIES RESEARCH NPN SJ

HOW WE DIFFER FROM THE T STREET


BNPP Consensus Target Price* (ZAR) Core HEPS 2014 (ZAR) TARGET* PRIOR TP* CLOSE* UP/DOWNSIDE ZAR82,900 ZAR62,000 ZAR79,950 +3.7% Market Recs * in cents Core HEPS 2015 (ZAR) 82,900 30.65 36.33 Positive 11 80,305 21.40 28.10 % Diff 3.5 43.2 29.3

NASPERS LTD
SOUTH AFRICA / MEDIA

HOLD
FROM BUY INDUSTRY OUTLOOK

Neutral Negative 4 1

KEY STOCK DATA


YE Mar (ZAR m) Revenue Rec. net profit Recurring EPS (ZAR) Prior rec. EPS (ZAR) Chg. In EPS est. (%) EPS growth (%) Recurring P/E (x) Dividend yield (%) EV/EBITDA (x) Price/book (x) Net debt/Equity (%) ROE (%)
Jul-12 87,177 82,177 77,177 72,177 67,177 62,177 57,177 52,177 47,177 42,177 (ZAr) Oct-12 Jan-13

Game theory
ASSOCIATE-DRIVEN
Downgrade to HOLD; raise TP to ZAR829 We estimate that Naspers provides discounted entry into Tencent (700 HK, not rated), the dominant player in the online gaming sector in China, of 9.8-20.9%. 20.9%. Despite the threat of regulatory intervention in local content quotas and content sharing, we believe that DSTV is likely to remain dominant in South Africa over the medium term.

2014E 59,029 11,836 30.65 24.25 26.4 11.2 26.1 0.6 14.6 4.8 2.8 20.1

2015E 68,932 14,027 36.33 28.96 25.4 18.5 22.0 0.7 12.1 4.0 (4.9) 19.9

2016E 79,169 20,109 52.08 N/A 43.4 15.4 0.8 9.1 3.4 (11.1) 24.0
Jul-13 57 47 37 27 17 7 (3)

DOMINANCE VS REGULATORY ORY THREAT


Strong gaming, e-commerce in China Our valuation reflects the improvement in consensus view of Tencents growth prospects and our view of Naspers continued dominance of the South Africa pay TV sector, despite the threat of regulatory intervention in content quotas and wholesaling of content. We feel that much of the improved consensus view is priced in, hence our HOLD rating.

Apr-13

CONSENSUS & ZAR EFFECTS


We evaluate Tencents positioning and DSTV dominance in pay TV We increase our TP to ZAR829 based on a two-stage stage FCFF DCF model and downgrade to HOLD. Our model incorporates consensus estimates for associates. The significant change nge here reflects the change in consensus opinion of Tencent and a weakening ZAR. Risks: associates outperforming consensus; regulatory intervention in SA pay-TV TV content wholesaling. wholesaling

Naspers Ltd

Rel to FTSE JSE All Share

(%)

Share price performance Absolute (%) Relative to country (%) Next results

1 Month 3 Month 12 Month 5.5 5.1 38.8 30.1 75.2 54.3

March 2014 31,082 117.7 75 State Street (17%) 79,950/44,373 31.3 NPSNY 80.46 386

KEY CHART
Tencents proportion of Naspers NAV
100% 80% 60% 40% 20% 0%

Mkt cap (USD m) 3m avg daily turnover (USD m) Free float (%) Major shareholder 12m high/low (ZAr) 3m historic vol. (%) ADR ticker

Jul-04 Dec-04 May-05 Oct-05 Mar-06 Aug-06 Jan-07 Jun-07 Nov-07 Apr-08 Sep-08 Feb-09 Jul-09 Dec-09 May-10 Oct-10 Mar-11 Aug-11 Jan-12 Jun-12 Nov-12 Apr-13

ADR closing price (USD; 18 July 2013) Issued shares (m)

Sources: Bloomberg consensus; BNP Paribas Cadiz Securities estimates

Sources: Bloomberg; BNP Paribas Cadiz Securities

Ian Brink
ian.brink@bnpparibascadiz.com +27 21 834 3660

BNP Paribas Securities (Asia) Ltd. research is available on Thomson One, Bloomberg, TheMarkets.com, Factset and on http://eqresearch.bnpparibas.com/index. http://eqresearch.bnpparibas.com/index Please contact your salesperson for authorisation. Please see the important notice on the back page.

PREPARED BY BNP PARIBAS SECURITIES ASIA IM DISCLOSURES CAN BE FOUND IN THE DISCLOSURES APPEND DIX THIS MATERIAL HAS BEEN APPROVED FOR U.S DISTRIBUTION. IMPORTANT

19 JULY 2013

Naspers Ltd

Ian Brink

Introduction
Over the last few years, the performance of Naspers has been strongly linked to the performance of its 34%-owned associate Tencent (400 HK, not rated). During the five years to 10 July 2013, Tencents share price rose approximately 423% (39% annualised) while the Hang Seng declined 6% (1% annualised). On the back of this strong share price performance by Tencent, as well as the strong performance of another key associate, mail.ru (MAIL LI, not rated) and the pay TV segment, Naspers share price has climbed approximately 373% (37% annualised) over the same period, significantly outperforming the FTSE JSE All Share which climbed 43% (7% annualised). E-commerce remains the key growth area, but with management unable to give any specific indication of when the e-commerce business as a whole is expected to turn profitable, the prospects for the business remain firmly a function of the performance of its pay-TV operations as well as the performance of its key associates, most importantly Tencent. In this note we: Identify the key trends developing in the Chinese internet market; Evaluate Tencents positioning in this market and its exposure to these emerging trends; Test the hypothesis that Naspers provides a discounted entry point into Tencent, and attempt to estimate this discount; Provide a breakdown of the different types of broadcasting content and arrive at an estimate of the price differential between locally produced and foreign procured content. We also highlight the potential threats to the domestic pay-TV business from new entrants and potential changes to the regulatory framework. We update our valuation accordingly. Tencents performance continues to drive Naspers share price Tencent continues to be the main driver of Naspers share price comprising nearly 81% of the share price on a NAV basis. Tencents performance during Q1 2013 surprised the market on the upside with revenue increasing 40% y-y to RMB13,548m (USD2.16b) and diluted EPS increasing 36.5% to RMB2.17. The exhibits below show the price performance of Tencent and Naspers over the last five years as well as the contribution which Tencent makes to Naspers on a NAV basis. EXHIBIT 1: Naspers versus Tencent price performance (rebased to 1)
(x) 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0
Sep-08 Jan-09 Sep-09 Jan-10 Sep-10 Jan-11 Sep-11 Jan-12 Sep-12 May-08 May-09 May-10 May-11 May-12 Jan-13 May-13

EXHIBIT 2: Tencent as a proportion of Naspers NAV


100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
Jul-04 Jul-05 Jul-06 Jul-07 Jul-08 Jul-09 Jul-10 Jul-11 Jul-12 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jul-13

700 HK Equity

NPN SJ Equity

Source: Bloomberg

Source: Bloomberg

The continued positive performance of Naspers thus hinges strongly on the growth prospects of Tencent going forward. As a result of slower Chinese GDP growth, growth in internet penetration in China has slowed. Tencent is still largely dependent on China for its revenue. China contributed approximately 95% to Tencents group revenue in FY12. The exhibit below shows the trend in Chinese GDP as well as the growth of Chinese internet penetration.

BNP PARIBAS

19 JULY 2013

Naspers Ltd

Ian Brink

EXHIBIT 3: Chinese annualised quarterly GDP (%)


(%) 14 12

EXHIBIT 4: Chinese internet penetration and annual growth in internet users (%)
Penetration 60% 50% Annual growth in internet users

10 8 6 4 2 0
Mar-00 Nov-00 Jul-01 Mar-02 Nov-02 Jul-03 Mar-04 Nov-04 Jul-05 Mar-06 Nov-06 Jul-07 Mar-08 Nov-08 Jul-09 Mar-10 Nov-10 Jul-11 Mar-12 Nov-12

42.1% 40% 28.9% 30% 22.6% 20% 10% 0% 2005 2006 2007 2008 2009 2010 2011 2012
Source: China Internet Watch

38.3% 34.3%

16.0% 8.5% 10.5%

Source: Bloomberg

From the above exhibits we note the following: Internet penetration in China as at the end of 2012 stood at around 42% the low internet penetration rate presents an organic growth opportunity for internet-related businesses such as Tencent. Lower levels of economic activity over the last few years are partly to blame for the slowdown in internet penetration growth over the last few years. The negative impact on organic growth due to slower growth in internet penetration has been mitigated by increased revenue per user due to increased mobile internet usage and more advanced and dataintensive handsets and applications. A summary of Tencents performance The exhibit below shows Tencents segmental revenue contribution for Q1 2013 and FY2012. EXHIBIT 5: Tencent segmental contribution
Segment 1QFY13 (%) VAS (IVAS and MVAS) Online advertising E-commerce Other Source: Tencent 78.7 6.3 14.1 0.9 FY12 (%) 81.4 7.7 10.1 0.8

We note the following: Value added services (VAS), both internet-based (IVAS) and mobile-based (MVAS), make the largest contribution to group revenue. VAS includes social networking, web search, micro-blogging, avatar sales, music consumption, email and gaming. IVAS and MVAS: The largest contribution to this segment is online gaming. Online gaming is very popular in China, with nearly 330m individuals participating in the pastime. Global online gaming is estimated to generate annual revenue of around USD15b during 2013, 62% of which is expected to come from China according to Strategy Analytics. Niko Partners estimates that online gaming in China alone could reach USD11.9b this year. Online advertising revenue declined 10.3% q-q during Q1 due to seasonality, with advertisers typically spending less during the first quarter of the year. Tencent launched its open e-commerce platform towards the end of 2011 to leverage its existing subscriber base in an attempt to participate in the rapidly expanding e-commerce sector. Building of the e-commerce platform remains a key priority for Tencent. In a short period of time, the e-commerce strategy, which exploits the principle of social commerce, has paid significant dividends. E-commerce

BNP PARIBAS

19 JULY 2013

Naspers Ltd

Ian Brink

made a revenue contribution of 14.1% during Q1FY13. Social commerce uses interactions on social media and user contributions to drive product sales. An overview of the Chinese internet market The exhibit below shows the trend in internet users in China. EXHIBIT 6: Number of internet users in China
(m) 600 513 500 400 298 300 210 200 111 100 0 2005
Source: CNNIC

564 457 384

137

2006

2007

2008

2009

2010

2011

2012

As at the end of December 2012, China had approximately 564m internet users. The Chinese Ministry of Industry predicts that the amount of netizens (individuals who access the internet), is likely to rise to approximately 800m by 2015. The exhibit below provides an overview of the various web activities which comprise the Chinese internet market together with the penetration rates (as a proportion of internet users), as well as the growth rates in activity for the six months to June 2012. EXHIBIT 7: Web activity in China
Web-activity Penetration (%) Instant Messaging Search Music News Blogs / Personal sites Videos Games Micro-blogs Email Social Networking E-commerce E-learning E-banking E-payment Forums Group buying Travel booking Online investing Sources: Tech in Asia; Tencent 82.8 79.7 76.4 73.0 65.7 65.1 61.6 50.9 48.1 46.6 39.0 36.2 35.5 34.8 29.0 11.5 7.9 7.0 Growth rate * (%) 7.2 5.2 6.4 6.9 10.9 7.6 2.1 9.5 5.1 2.6 8.2 (4) 14.8 12.3 7.7 (4.4) 1.2 (5.5)

From the above exhibit we note the following: Among internet users, instant messaging is the most popular web activity. Tencents QQ is dominant in this regard.

BNP PARIBAS

19 JULY 2013

Naspers Ltd

Ian Brink

Web search, downloaded and streamed music, news consumption, blogging, online video streaming, gaming and micro-blogging are the next most popular activities, in order. Tencent has exposure to all of these activities as well as email, social networking and e-commerce. E-banking and e-payments were the fastest growing web activities followed by blogging and updating of personal web-sites. Online investing, group buying and e-learning are the fastest shrinking web activities. Chinas internet landscape is dominated by three companies Baidu Inc - ADR (BIDU US; BUY; CP USD111.2), Tencent and ALIBABA.COM LTD (1688 HK; not rated), with Tencent being the largest in terms of revenue, traffic volume and application exposure. Consolidation of the Chinese internet market Intense competition between Chinas big three internet businesses has resulted in some consolidation of the market. Currently, online market place Alibaba dominates the e-commerce space, Baidu dominates web search and Tencent dominates messaging and gaming, but also has fairly broad exposure to other industry segments. The most significant trend in the Chinese internet space is the growth in mobile internet usage. With both an established PC and mobile presence and an existing subscriber base on each, Tencent seems well positioned to exploit this trend. The most significant internet-related acquisitions over the last year include: The acquisition of an 18% stake in Sina Corporations micro-blogging service by e-commerce firm Alibaba for USD586m in April this year. Sina Weibo is Chinas largest micro-blogging service, with more than 500m subscribers. Micro-blogging is the generic name given to services similar to Twitters. The acquisition will help to position Alibaba for the migration from e-commerce to m-commerce by allowing it to tap into Weibos existing mobile subscriber base. Baidus acquisition of the online video platform of PPS for USD350m in May this year. PPS will be merged with Baidus online video business, iQiyi to form Chinas largest online video platform. The acquisition will allow Baidu to build a strong presence in online video sharing which is monetised via advertising. Baidus market share of mobile search is approximately 35% with less than 10% of revenue being derived from mobile ads in 2012 (Beijing Daily, WIC). Baidu has struggled to diversify its business. Only two years after launching its e-commerce platform it was forced to shut it down. In August last year, Chinese online video platform Youku acquired its rival Tudou and, as such, became the largest online video platform in the country, with more than 30% of the market and a user base of more than 450m users. Chinese e-commerce growth potential In 2012, more than USD200b was spent online in China (this excludes food and travel) this is approximately ten times more than was spent in 2008 (WIC). The e-commerce industry in China is expected to grow to approximately USD300b by the end of 2013, with Chinas online sales surpassing the US for the first time this year. The Chinese are expected to spend approximately USD296b in 2013, slightly higher than the USs USD252b. Growth in Chinese e-commerce sales is expected to decline to 19% in 2013 from 23% the previous year (Source: iResearch). During 2012, Chinas largest e-commerce business (Alibaba) generated USD160b in revenue with revenue from first-tier cities including Beijing, Shanghai and Guangzhou growing 40% y-y and sales in lower-tier cities growing at 60% (TIA). The exhibits below show the historical and forecast trend in online sales and online sales growth in China as well as the trend in the number of online shoppers and penetration of online shopping amongst internet users.

BNP PARIBAS

19 JULY 2013

Naspers Ltd

Ian Brink

EXHIBIT 8: Online sales and online sales growth in China including forecasts
(USD b) 700 600 500 400 300 200 100 0 2008 2009 2010 2011 2012 2013F 2014F 2015F 2016F
Source: Observer solutions via TIA

EXHIBIT 9: Number of online shoppers and online shopping penetration of internet users.
(Nr) 400 350 300 250 200 150 100 50 0 2009 2010 2011 2012 2015F
Sources: CINIC; Observer Solutions; TIA

Sales (LHS)

Growth (RHS) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

Online Shoppers (LHS) Online shopper penetration (RHS)

(%) 60 50 40 30 20 10 0

% % % % % % %

Search in China dominated by Baidu One of the web activities in China which Tencent does not dominate is web-search. This space is almost entirely owned by Baidu which had an estimated market share of approximately 81% as at the end of Q1FY13. In the year ending March 2013, the PC search engine sector in China generated revenue of approximately USD4.8b according to estimates by iResearch. During Q1 2013, PC web search shrank 6.8% mainly as a result of increased search on mobile devices. Tencents search engine SOSO has a revenue market share of less than 2% of Chinese search. With the entrenchment of Baidu in the search sector, it seems unlikely that Tencent will gain traction in this area over the medium term, in our opinion. EXHIBIT 10: Search engine market size in China
(USD b) 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0
Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013

1.26 1.12 0.88 0.72 0.44 0.31 0.50 0.54 0.53 0.94 0.89

1.29

1.21

Sources: iResearch; 1USD = 6.14 CNY

Gaming is big business in China In FY12, total Chinese gaming revenue grew 35% y-y to USD9.7b (Techweb). Online gaming accounts for nearly 90% of total gaming revenue. The gaming industry report compiled by Techweb estimates that revenue from gaming could grow to approximately USD21.7b by 2017 an annualised rate of 12.4%. Tencents share of online gaming revenue grew to RMB7,472m in 1Q13, mainly as a result of revenue derived from the Chinese market, which accounted for approximately 88%. Tencent either develops its own games or licenses games belonging to other developers. The strong revenue derived by Tencent from gaming during 1QFY13 resulted from: The high demand for its titles such as Cross Fire, Dungeon and Fighter and League of Legends which are among the most popular gaming titles in the country; Seasonal effects of the Chinese New Year holidays and the winter break for students during the quarter; A positive response to expansion packs on existing game titles;

BNP PARIBAS

19 JULY 2013

Naspers Ltd

Ian Brink

The contribution of new self-developed gaming titles; Strong revenue growth derived (albeit off a low base) from international markets; Increased revenue from mobile gaming. The online gaming sector in China is highly competitive. During 1Q13, the top-six gaming companies in China (which includes Tencent, Netease, Changyou, Shanda, Perfect World and Giant) generated revenue of approximately USD2.09b, of which Tencent generated USD1.2b or 58%. The exhibit below provides the breakdown of the distribution of gaming revenue across the top-six gaming companies in China. EXHIBIT 11: First quarter revenue of the top-six gaming companies in China
(USD b) 1.4 1.22 1.2 1.0 0.8 0.6 0.4 0.2 0.0 Tencent
Sources: TIA; Tencent

0.33 0.18 0.17 0.1 Perfect World 0.09 Giant

Netease

Changyou

Shanda

Tencents performance in the gaming sector is supported by a strong portfolio of existing game titles. The exhibit below shows the top-20 online games ranked according to their popularity as measured by one of Chinas most popular gaming portals, 17173.com. The titles highlighted in grey indicate those which were either developed by, or licensed to, Tencent. EXHIBIT 12: Top-15 most popular game titles in China as at 14 July 2013
Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Title League of Legends DNF Fantasy Westward Journey 2 World of Warcraft Cross Fire Jian Wang 3 Dragon QQ Speed Dragon in the day World of Tanks Westward Journey 2 Wuhun Perfect World Zhu Xian 2 Kart Developer Riot Games Neople Netease Blizzard Smilegate Kingsoft Sohu tour Tencent Tencent War gaming Netease Netease Perfect World Perfect World Nexon Operator Tencent Tencent Netease Netease Tencent Kingsoft Sohu tour Tencent Tencent Air Network Netease Netease Perfect World Perfect World TianCity

Source: 17173.com

We note the following: Of the top-15 most popular games in China according to gaming portal 17173.com, five (including three of the top five) were developed by/licensed to Tencent. Tencents next largest competitor Netease developed and/or licensed four of the top 15.

BNP PARIBAS

19 JULY 2013

Naspers Ltd

Ian Brink

Rankings differ slightly from portal to portal, but League of Legends, Dragon Fighter and Cross Fire consistently occur in the top-five most popular games. The table below shows the top-15 most anticipated new gaming titles according to 17173.com. EXHIBIT 13: Top-15 most anticipated gaming titles in China as at 14 July 2013
Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 Titles A sword of the Spirit Guild Wars 2 ArcheAge Fighting Ares Paradise Eternal Blast Blade Elder Scrolls OL horizon moon knife Final Fantasy 14 To the City of Light MU2 6574 Dragon Quest 10 Long Sword Fighter World Swords 2 Developer Ncsoft ArenaNet XL Games Tencent Ncsoft Allm Bethseda Tencent Square Enix Eyedentity Webzen Square Enix Net Ease War Gaming Pixel Network Operator Tencent Air Network Tencent Tencent Unknown Tencent Unknown Tencent Shanda Shanda Unknown Unknown Net Ease Air Network Tencent

Source: 17173.com

We note the following: Of the top-15 most anticipated titles, six have been developed and/or licensed to Tencent (including three of the top five). Netease only has a single title at number 13 in the top 15, while another competitor, Shanda, has two titles. Unbanning gaming consoles in China One of the reasons contributing to the thriving online gaming industry in China was the banning of video game consoles in 2000. Thirteen years later, the Chinese government is considering lifting the ban on video game consoles. The move could see the big game console manufacturers benefiting by gaining exposure to a potentially large and untapped market, but the online gaming providers could see their share of the gaming market decline as users migrate away from online games towards console-based games. Even though there is currently a black market for illegal gaming consoles in China, console game revenue is estimated to generate a mere 0.1% of total gaming revenue according to Techweb. The growing importance of mobile internet With nearly half of the Chinese population residing in rural parts of the country, mobile access to the internet is becoming increasingly important. As of June 2012, it is estimated that mobile internet users in China (388m) overtook PC users (380m) for the first time bringing the proportion of Chinese internet users who make use of mobile devices to browse the internet to around 75%. The exhibits below show the trend in Chinas mobile internet users as well as the proportion of internet users per access method.

BNP PARIBAS

19 JULY 2013

Naspers Ltd

Ian Brink

EXHIBIT 14: Mobile internet users in China


(m) 800 700 600 500 400 303 300 200 100 0 2008 2009 2010 2011 2012F 2013F 2014F 2015F
Source: IResearch

EXHIBIT 15: Proportion of Chinese internet users per access mechanism (PC and mobile)
(y-y) 712 571 120% 100% 120% 100% 80% 60% 40% 40% 20% 20% 0% 0.28 0.96 0.75 0.71 PC access Mobile access

Users (LHS)

Growth (RHS)

492 411 338

80% 60%

233 118

Jun 07

Jun 08

Jun 09

Jun 10

Jun 11

Jun 12

Dec 07

Dec 08

Dec 09

Dec 10

0%

Source: China Internet Network Information Centre (CINNIC)

We note the following: Over the next three years, the number of mobile internet users is expected to increase strongly. By 2015, iResearch estimates approximately 712m mobile internet users a CAGR of 20% over the next 3 years. Towards the end of 2012, the proportion of Chinese internet users connected via mobile devices exceeded those connected via PCs for the first time. Mobile internet penetration continues to trend upwards, whilst PC internet penetration appears to be trending down to flat. The above trends illustrate the importance of having exposure to mobile internet usage. With monthly active users (MAU) of 550m on Mobile QQ and 194m MAU on Weixin as at Q1 2013, Tencent seems well positioned to benefit from this trend. The exhibits below show the segmental breakdown of the Chinese mobile internet market as well as the revenue trend of the Chinese mobile internet market on a quarterly basis. EXHIBIT 16: Segmental breakdown of the Chinese mobile internet market
(%) % % % % % % % % % % % 100 90 80 70 60 50 40 30 20 10 0 7.2 21.2 7.3 8.7 20.5 7.4 10.4 19.2 8.3 12.5 17.1 8.8 17.4 14.8 9.4 24.2 13.2 9.9 29.9 12.2 10.3 32.1 12.0 11.6 33.7 62.6 61.6 60.2 59.7 56.5 50.8 45.6 42.0 38.9 Mobile Search Mobile Gaming Mobile VAS Mobile Marketing Mobile Shopping

EXHIBIT 17: Chinese mobile internet revenue trend and y-y growth
(USD b) 3.5 3.01 3.0 2.5 2.0 1.5 1.0 0.93 1.06 40 20 0 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13F
USD1 = RMB6.14 Source: iResearch

Dec 11

Revenue (LHS)

Growth (RHS)

(y-y %) 3.33 140 120 100 80 60

Dec 12
% % % % % % % %

2.72 2.30 1.90 1.62 1.28

11.9 13.1

0.5 0.0

1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13F


Source: iResearch

We note the following: Mobile search makes the smallest revenue contribution less than 3%. Mobile shopping contributes approximately a third to mobile internet revenue. Revenue from Chinas mobile internet market grew approximately 75% y-y to the end of Q1 2013 with quarterly revenue reaching approximately USD3.3b. Even though still relatively small in comparison to

BNP PARIBAS

19 JULY 2013

Naspers Ltd

Ian Brink

the total size of the Chinese internet economy, the high rate of growth is expected to persist over the medium term as mobile internet continues to increase in penetration. As at Q3 2013, mobile internet revenues comprised approximately 14% of the total internet economy in China. Given the ongoing adoption of mobile devices as a means of connecting to the internet, which is not only confined to China, it is hardly surprising that a key part of Tencents strategy is to deploy and monetise a mobile platform. The monetisation of WeChat/Weixin Weixin is a multi-service mobile communications application developed by Tencent in 2011 for deployment in China. The service has subsequently been employed in the international market under the marque WeChat. Even though the basic functionality of the application is available free-of-charge to the user, Tencent seeks to entrench the application both in China and outside its borders and then to monetise certain additional features. Weixin/WeChat could satisfy multiple requirements for the continued success of Tencent. On the one hand it provides the business with another means of participating in the growth of mobile-based web activity, and it also provides a mechanism for building Tencents international footprint. The exhibit below shows the trend in the proportion of Tencents revenue derived from China. EXHIBIT 18: Tencent revenue derived from China
100.0% 100% 99% 98% 97% 96% 95% 94% 93% 92% 2007
Source: Bloomberg

100.0%

100.0%

99.9% 98.4%

95.1%

2008

2009

2010

2011

2012

During 1Q13, Weixin and WeChat averaged approximately 194m monthly active users (MAU) implying growth of 228% y-y. Approximately 300m Weixin/WeChat users reside in China, while approximately 70m reside outside of China, suggesting that as a mechanism for geographic diversification, international WeChat penetration still has some way to go. Weixin/WeChat users are expected to reach 400m by year-end (China News). The rapid growth in Weixin subscribers has resulted in a dispute with Chinas largest operator, China Mobile (941 HK, BUY, CP: HKD81.30). The dispute arose out of the fact that WeChat resulted in the cannibalisation of the mobile operators messaging revenue while at the same time generating large volumes of traffic and negatively impacting the operators available capacity. China Mobile attempted to force Tencent into a revenuesharing agreement but eventually backed down. Even though this issue seems to have been put to rest, the fact that it could resurface remains a threat especially as penetration grows in other international markets. One of the ways in which Tencent seeks to monetise Weixin and WeChat is through the deployment of a gaming platform. The platform will consolidate Tencents existing mobile offering which includes Mobile QQ and Qzone, QQ store and QQ Game Hall with Weixin/WeChat. On 10 July 2013 Tencent deployed its first Weixin-based game, LinkLink, on Android still in the pilot stage. The strategy seems plausible given that it follows similar successful steps by platforms such as KakaoTalk to migrate from exclusively chat platforms to mobile gaming platforms. Other monetisation strategies include the deployment of a mobile payment system on Weixin/WeChat which will position Tencent to compete against Alibaba for a share of m-commerce. Currently, Tencents payment platform is the second-largest in the country behind Alibabas Alipay.

10

BNP PARIBAS

19 JULY 2013

Naspers Ltd

Ian Brink

Naspers a discounted entry point into Tencent Is Naspers purely a play on Tencent (and Mail.ru), and if so, why should investors who can, not simply invest directly in Tencent (and Mail.ru)? This is a question which frequently bedevils potential investors. Even though we are downgrading Naspers based on the current market price relative to our DCF valuation, we attempt to answer this question in the following discussion and analysis. There are two potential answers to this question: 1 By investing in Naspers (as opposed to directly investing in Tencent), the investor gains exposure to Naspers established and cash-generative pay-TV business in South Africa and growth pay-TV assets in sub-Saharan Africa as well as exposure to Naspers e-commerce, which is still very much in the building phase but likely to be a growth asset going forward. For those investors who are sceptical of the e-commerce growth story, one suggestion is that Naspers also provides a discounted entry point into Tencent. We test this thesis below by revisiting our sum-ofthe-parts (SoTP) valuation below.

Something is at a discount In our initiation report on Naspers (Casting the net, 1 November 2012), we made use of a sum-of-the-parts valuation to value the company at ZAR679-763 implying a discount of between 16-31%. The pertinent question, however, is which part of Naspers is one purchasing at a discount? For investors who are only interested in gaining access to Tencent, Naspers may be seen as a discounted entry point. Alternatively, the rump (i.e. everything else except Tencent and Mail.ru) might be discounted and Tencent and Mail.ru might be fully priced. If Naspers is a cheaper entry point into Tencent, then essentially the following should apply: {(Naspers [NAV] Pay TV Mail.ru Print Other) / 34%} < Tencent [NAV] By updating our SoTP valuation we estimate this discount as follows: The value of the pay TV and print business using EV/EBITDA multiples based on work done by Stern Business School (see our initiation report for details). We provide both a lower bound and an upper bound assumption on EV/EBITDA multiples for pay TV and Print as per Sterns guidance for EM and DM markets, respectively. Our lower bound also assumes exit costs of 10% versus exit costs of 5% for the upper bound. In using EV/EBITDA for the pay-TV and print segments we are assuming that the carried debt related to these segments is close to zero, which implies that the EV and NAV are very similar. For pay TV and print this is probably a fair assumption. Unlisted assets are valued at their carrying value (cost less depreciation and impairment) Listed associates (excluding Tencent) are valued at their proportional market caps.

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BNP PARIBAS

19 JULY 2013

Naspers Ltd

Ian Brink

This yields the following segmental valuations. EXHIBIT 19: Tencent entry point discount assumptions as at 3 July 2013
------------ Lower bound -----------EBITDA (ZAR m) Pay TV Print 8,933 1,167 EV/EBITDA (x) 6.45 5.86 Valuation (ZAR m) 57,618 6,839 64,456 Carrying value of unlisted assets FY12 Acquisitions in FY13 22,810 6,437 29,247 Mcap (ZAR m) Mail.ru BMC 64,096 1,137 Share (%) 29.0 9.9 Valuation (ZAR m) 18,588 113 18,700 Source: BNP Paribas Cadiz Securities Mcap (ZAR m) 64,096 1,137 Share (%) 29.0 9.9 ------------ Upper bound -----------EBITDA (ZAR m 8,933 1,167 EV/EBITDA (x) 7.99 6.84 Valuation (ZAR m) 71,375 7,982 79,357 22,810 6,437 29,247 Valuation (ZAR m) 18,588 113 18,700

Using these segmental valuations we arrive at a lower bound and upper bound discounted entry point into Tencent via Naspers as follows: EXHIBIT 20: Implied Tencent entry point discount as at 3 July 2013
Consideration NPN Market Cap (ZAR m) Pay TV & Print (ZAR m) Mail & BMC (ZAR m) Internet and Tech (ZAR m) Implied NAV of Tencent share (34%) Implied NAV of Tencent (100%) Market value of Tencent NAV (ZAR) Discount on Tencent stake Implied holding company discount (%) Less exit costs (%) Entry point discount (%) Source: BNP Paribas Cadiz Securities Lower Bound 309,000 64,456 18,700 29,247 196,596 578,224 721,137 142,913 19.8 10.0 9.8 Upper Bound 309,000 79,357 18,700 29,247 181,696 534,399 721,137 186,738 25.9 5.0 20.9

With a fairly conservative rump valuation, we estimate the discount into Tencent via Naspers as at 3 July 2013 at between 9.8% and 20.9% - this includes the impact of exit costs. Applying the same methodology and pay TV and print multiples as above, we estimate the entry point discount into Tencent via Naspers as at 3 July 2012 (a year ago). EXHIBIT 21: Implied Tencent entry point discount as at 3 July 2012
Consideration NPN Market Cap (ZAR m) Pay TV & Print (ZAR m) Mail & BMC (ZAR m) Internet and Tech (ZAR m) Implied NAV of Tencent share (34%) Implied NAV of Tencent (100%) Market value of Tencent NAV (ZAR) Discount on Tencent stake Implied holding company discount (%) Less exit costs (%) Entry point discount (%) Sources: BNP Paribas Cadiz Securities Lower bound 183 322 56 263 16 708 22 810 87 541 257 473 446 134 142 913 42.3 10.0 32.3 Upper bound 183 322 69 083 16 708 22 810 74 721 219 769 446 134 186 738 50.7 5.0 45.7

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BNP PARIBAS

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Naspers Ltd

Ian Brink

As at 3 July 2012, we estimate the entry point discount into Tencent via Naspers at between 32.3% and 45.7% - significantly larger than the current discount. This suggests there is now less incentive to invest in Naspers purely to gain exposure to Tencent. Sum-of-the-parts valuation We apply our conservative multiples for pay TV and print as well as exit costs of 10% to arrive at a lower bound SoTP valuation of Naspers. EXHIBIT 22: Lower bound NAV estimate
Segment Valuation method Est. value (ZAR m) Pay TV Listed assets Internet a d Technology Print EV/EBITDA multiple Market capitalisation Est. carrying value EV/EBITDA multiple 57,618 280,515 29,247 6,839 374,219 Lower of EM and Global multiples Est. Flow through value Cost less impairments Lower of EM and Global multiples Comment

Est. exit costs (%) SOTP valuation Per share: Implied discount (%) Source: BNP Paribas Cadiz Securities

10 336,797 854.16 2

We apply more aggressive multiples for pay TV and print as well as exit costs of 5% to arrive at an upper bound SoTP valuation of Naspers. EXHIBIT 23: Upper bound NAV estimate
Segment Valuation method Est. value (ZAR m) Pay TV Listed assets Internet and Technology Print EV/EBITDA multiple Market capitalisation Est. carrying value EV/EBITDA multiple 71,375 280,515 29,247 7,982 389,119 Higher of EM and Global multiples Est. Flow through value Cost less impairments Higher of EM and Global multiples Comment

Est. exit costs (%) SOTP valuation Per share: Implied discount (%) Source: BNP Paribas Cadiz Securities

5 369,663 937.52 12

On this basis Naspers should be trading in the ZAR854-938 range implying a discount of 2% to 12%.

Summary
Tencent has exposure to all of the most popular web activities in China, including e-commerce, which is expected to grow dramatically over the next few years. With six of the top 15 and three of the top five most anticipated new online games, Tencent appears to have a much stronger gaming pipeline than any of its major competitors; this should help it to retain its dominance of the highly lucrative gaming sector in China over the medium term. Tencents existing mobile subscriber base places it in a good position to benefit from the growth in mobile internet usage. Mobile internet access now exceeds PC internet access in China. Wexin/WeChat provides Tencent with another means of participating in the growth of mobile-based web activity in China. It also helps Tencent to diversify its geographic exposure. Given the rate at which Weixins subscriber base is growing, the deployment of a games platform on it could be highly lucrative.

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BNP PARIBAS

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Naspers Ltd

Ian Brink

By our estimates, Naspers could provide a discounted entry point into Tencent of between 9.8% and 20.9%.

Pay TV
Naspers pay-TV business in SA remains dominant and largely unchallenged. Even though we expect DSTV to remain dominant over the medium term, we believe that a number of potential threats could impact the profitability of the business going forward. These issues include: More onerous local content quotas the proportion of content which is regulatory required to be locally produced; Potential competition from new license awardees; The threat of amended regulation around programming content exclusivity and wholesaling. SA Local content quotas In our note TV Turf Wars (25 January 2013), we highlighted the following: The importance of local content in the domestic pay TV market. Of the top-10 most popular programmes on SA television ranked using the audience measurement rating (AMR) all 10 are locally produced shows and all are screened on SABC1. Local content is incredibly costly to produce and, as such, is one of the factors that has negatively impacted on the profitability of the public broadcaster the SABC. Local content quotas are prescribed by ICASA. Currently, subscription operators such as DSTV in SA are only required to screen 8% local content much less than the public broadcaster and private commercial channels, which are required to have 55% and 35% local content, respectively. Quantifying the difference between local and international content pricing Based on our discussions with a broadcasting content aggregation and production executive, we highlight the differences in programming cost between locally-produced and foreign-procured content as follows: Locally produced content production costs in SA could range from ZAR1,500 to ZAR27,000 per minute depending on the nature and popularity of the series/drama. In contrast, foreign premium content prices can vary from USD1,000 to USD10,000 per episode for a 21 minute programme (for new content) or ZAR476 to ZAR4,760 per minute with the actual price being dependent on the target market and the popularity of the series and length of the episode. Often, international content is purchased in 'bundled' distribution deals of premium and library content. Other factors that impact international content acquisition prices include the size of the broadcasters subscriber base, exclusivity, type of channel (free-to-air or pay channel), ratio of repeats, intended broadcast time-slot (primetime versus shoulder), period of the broadcasting rights and personal relationships with the content providers. Older international content can be acquired at a significant discount. An old series of a 21 minute sitcom can be acquired for between USD250 and USD700 per 21 minute episode (or ZAR119 to ZAR333 per minute). The generally accepted market norm for a syndicated international channel (often referred to as a 'turnaround' channel) is approximately USD25,000/month for 24hr-a-day programming (ZAR174 per minute of programming). More often than not, these turnaround channels are comprised of a 6-8hr 'prime-time' window which carries the channels feature programming, with various shoulder period and 'day-time' loops making up the balance of a 24hr daily schedule.

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BNP PARIBAS

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The exhibit below summarises the programming cost comparison. EXHIBIT 24: Pricing comparison between locally produced and finished programming content
Type of content Price per minute (ZAR) Locally produced (premium) content Internationally procured (newish premium) content Internationally procured (older) content Syndicated programming Source: Discussions with a broadcasting content aggregation and production executive 1,500 to 27,000 476 to 4,760 119 to 333 174

On average, on a like for like basis, finished programming is about 5-10 times cheaper than locally commissioned and produced content. Naspers spent approximately ZAR1b on 6,000 hours of locally produced content in FY13 amounting to ZAR2,777 per minute. The significant difference in pricing between locally produced content and internationally sourced content implies that if DSTV increases the proportion of local content, either out of necessity due to regulatory pressure or the desire to capture greater market share, this could put pressure on pay TV margins in SA. Estimating the impact of increased SA local content on total Pay TV Margin Programming content comprised approximately 32.5% of total pay TV operating costs during FY13. During FY13, ZAR6.94b was spent on programming content across SA and SSA. We expect that the amount of local programming content in SA is likely to increase, due to either DSTVs desire to boost domestic ratings or to the introduction of more onerous local content quotas in SA. In our note TV Turf Wars (25 January 2013) we illustrated the relative popularity of locally produced shows. We estimate the potential impact of an increase in local SA content on pay TV margin by making the following assumptions and estimates: Using the revenue contribution split between SA and SSA as a basis, we assume that SA comprises 73% of the total programming cost spent in FY13 - ZAR5.03b Local content costs approximately ZAR166k per hour based on Naspers disclosure in its FY13 results that it spent ZAR1b on > 6000 hours of local content across SA and SSA. We estimate the SA share of local content hours at 4351 hours using revenue split between SA and SSA as the basis. More local content will be additional to existing content ie the extra local content will not be a substitute for existing content We estimate that SA local content comprises approximately 14% of SA programming content cost. We summarise the impact of additional local content in SA on total pay TV margin: EXHIBIT 25: Additional local content in SA impact on total pay TV margin
Percentage increase in SA local content hours 0 Local content in SA (hours) Cost (ZAR m) Pay TV operating cost (ZAR m) Pay TV EBITDA (ZAR m) Pay TV EBITDA margin (%) Sources: BNP Paribas Cadiz Securities estimates 4,351 725 21 324 8 933 29.5 10% 4,786 798 21 397 8 860 29.3 15% 5,503 917 21 516 8 741 28.9 20% 6,604 1 101 21 700 8 557 28.3 25% 8,255 1 376 21 975 8 282 27.4 30% 10,732 1 789 22 388 7 869 26.0

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BNP PARIBAS

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Naspers Ltd

Ian Brink

Increased competition in SA pay TV Top TV continues to struggle Top TV continues to pose little threat to DSTV in SA, with the company still under business rescue, which commenced in October 2012. In November 2012, Top TV dropped three channels and added one, and in April 2013 it dropped another two channels. Despite fewer channels, monthly subscription fees have not been reduced. A number of potential investors have considered acquiring Top TV including Chinese based Star Times, but the 20% regulatory limitation on foreign direct investment in domestic broadcasters is likely to hamper this deal, in our opinion. Threat from new technologies such as IPTV still some way off Worldwide IPTV is still in its early stages. As at the end of March 2013, there were approximately 79.3m IPTV subscribers worldwide (Point Topic) with subscribers growing 21% y-y to the end of Q1 2013. China is the largest IPTV market with approximately 15.2m IPTV households or 23% of global IPTV subscribers. The top-five IPTV regions in the world are China, France, US, South Korea and Japan. In our note Vodacom: Voicing Concerns (26 June 2013), we highlighted our opinion that mobile network operators might seek to drive their data revenues by participation in providing streamed content provision including media content. The eagerness to participate in the provision of content could either count for or against Naspers DSTV. If, for instance, the MNOs partner with DSTV (who already possess the content licenses) and provide an alternative means of distributing this content, then Naspers stands to benefit from this arrangement. If, however, the MNOs seek to procure their own licensed content, then this will increase the level of competition in the pay TV space. This threat, if any, is likely still a few years off for the following reasons: Appropriate streaming of media content is likely only to gain traction once lower latency LTE has been deployed and is entrenched. The deployment of LTE is still likely to remain held up due to the difficulty in acquiring adequate spectrum. Data pricing is still way too high and the mechanism for pricing is still not conducive to high-volume media streaming. Zero-rated data is a pricing mechanism alluded to by former MTN Group (MTN SJ; BUY; CP ZAR18250) MD Karel Pienaar. Under this pricing regime it is envisaged that subscribers will only be billed for the streaming content they purchase and pay nothing for the actual data. MTN has previously indicated that it intends to launch a commercial IPTV service during the course of 2013 (broadcast engineering, tech central). Given the hold-up in acquiring spectrum so as to deploy adequate LTE, we doubt this will occur this year. Most of the content worth having is likely already licensed by Naspers these licenses firstly need to expire before other suitors are even allowed to participate in the bidding process. Even once LTE is entrenched, fixed line technology is still more suitable for video streaming applications. As such, Telkom (TKG SJ; HOLD; CP ZAR1871) likely poses a more immediate threat to DSTVs direct to the home (DTH) service in terms of IPTV. That said, with the degree to which the MNOs are self-provisioning (laying down their own fibre) at some point the deployment of fibre to the home (FTTH) becomes viable and, as such, the deployment of content, including media, over this fibre becomes realistic. In our opinion this is probably still at least three years out. Little threat to SA pay TV business from new licensees In our note TV Turf Wars (25 January 2013), we identified the five pay TV license applicants as follows: EXHIBIT 26: Individual commercial subscription broadcasting service licensees
Potential licensee Close TV Kagiso Mindset Media Mobile TV Siyaya Detail Targeting the LGBT sector Educational Educational No competing in the DTT / DTH space Focused on sport (rugby and soccer) FTA / Pay Pay Pa Pay Pay Pay Platform DTH DTT DTT Mobile DTT

Source: Government Gazette, December 2012

The license applicants will participate in public hearings that commence on 24 July 2013. All of the licensees, with the exception of Mobile TV, are likely to launch niche channels as opposed to a full general channel bouquet - so on their own, they are unlikely to pose a real threat to DSTV.

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BNP PARIBAS

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Naspers Ltd

Ian Brink

Mindset media is already being carried on the Multichoice bouquet. Programming remains the largest barrier to entry for the new entrants who wish to offer similar programming to DSTV, with most of the premium general entertainment content already having being tied up by Multichoice this is especially true of sport. We have previously identified regulatory intervention as a potential threat to the domestic pay TV business. Two issues in particular remain a concern to us intervention related to content exclusivity and government imposed local content quotas (discussed above). In May 2013, On Digital Media (parent company of Top TV) requested that the SA Competition Commission investigate Multichoice for anti-competitive behaviour relating to content exclusivity and procurement. The issue arose out of Multichoices failure to agree to terms with Top TV on commercial terms to carry Supersport 3 and 4. The complaint is currently still being screened by the Commission. Creating competition in the broadcasting sector remains a key objective of the Department of Communications, and as such remains the biggest threat to Naspers pay TV operations in SA. The introduction of policy that forces Multichoice to on-sell its content (especially live sport ) to other broadcasters, or to allow other competing broadcasters to carry certain channels (such as Supersport channels) on their platforms could impact DSTVs dominance of the SA marketing the future, in our opinion. Even though the new pay TV licensees on their own present little threat to DSTV in SA, the combination of new niche competitors together with regulatory intervention in forcing content sharing creates a material threat, in our opinion. Niche competitors who are able to concentrate their limited capital on certain market segments and build customised bouquets for that segment using a combination of cherry-picked content from DSTV as well as unknown procured content could erode DSTVs subscriber base. The lower LSM band in particular might find this attractive a small channel bouquet, at a low cost, with mostly cheap content and one or two premium sports items such as the English Premier League (EPL) or the Premium Soccer League (PSL) is an example of a combination which might be enticing to the market. Lessons from abroad The jostling for position and content in an environment in which broadcasting and telecommunications is starting to converge is not unique to SA. In the UK, British Telecom (BT) is starting to make moves on Sky TVs dominance of the live sport pay-TV market. BT has approached the UK broadcasting regulator, Ofcom relating to what it deems to be abusive terms regarding the supplying of channels Sky Sports 1 and 2 to BT for broadcasting on its YouView facility (The Daily Telegraph). The regulation of wholesale content prices is a lot more difficult than it seems. In the UK in 2010, Ofcom attempted to regulate the price at which Sky on-sells its sports channels to other broadcasters. Moreover the enforced pricing regime was based on a per subscriber fee which removed the natural monopoly created by the high cost of programming rights and small subscriber base. The regulation was met with legal challenges from various sporting bodies including the influential English Premier League, Rugby Football Union and Lawn Tennis Association who argued that the regulation would erode competition for broadcast rights and reduce the incentives for bidders to invest in sports rights. A subsequent appeal by Sky, Virgin Media, BT and the EPL against Ofcoms 2010 Wholesale must offer obligation was eventually overturned in August 2012 by the Competition Appeal Tribunal who disagreed with Ofcoms interpretation of the facts and conclusion that Skys dealings with its peers were unconstructive (Olswang). The biggest difference between the UK and SA situations is that in UK the argument regarding the live programming sports content is about the wholesale pricing of this content, whereas in SA the contention relates to the fact that the dominant broadcaster does not currently on-sell its sporting channels at all. Persistent weakness in ZAR likely to boost revenue The exhibit below shows our house view forecast of the USD/ZAR exchange rate for the 12 months ending March 2014. Naspers derives a significant proportion of its revenue from international operations as such the persistent weakness in the domestic currency is likely to boost revenue.

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EXHIBIT 27: Forecast monthly USD/ZAR exchange rate


(USD/ZAR) 11.00 10.50 10.00 9.50 9.00 8.50 8.00 9.18 9.37 9.11 10.20 10.25 10.35 10.40 10.50 10.40 10.30 10.25

10.03 10.10

Mar-13

May-13

Source: BNP Paribas Cadiz Securities estimates

Commitment to e-commerce In its recent results release, management once again reaffirmed its commitment to pursuing an ecommerce strategy. In light of the expensive market prices of e-commerce businesses, there is likely to be a preference for organic growth of the e-commerce platform as opposed to acquisition however, opportunistic acquisitions will be considered as and when they arise. Over the last five years Naspers has spent approximately USD2.4b on acquisitions mostly on e-commerce businesses. Despite managements comments last year that they were observing high market prices on e-commerce related businesses, Naspers spent USD634m on acquisitions during FY13.

Summary
Finished programming is about 5-10 times cheaper than locally commissioned and produced content. As such, increases to local content quotas could significantly impact margin. On their own, the new potential broadcasting licensees harbour little threat to DSTVs dominance in SA. We believe that there could be more regulatory intervention around the wholesaling of programming content which could significantly increase the ability of the new licensees to compete. This is, however, still likely some years off. Given the lack of available spectrum, the mobile operators are unlikely to be able to deploy IPTV. Even once spectrum is available and high-speed LTE is more widespread the technology still isnt ideal or cost-effective for this application fixed-line connectivity is still far superior in this regard. Segmental revenue contribution The exhibit below summarises the trend in Naspers historical segmental revenue contribution as well as our forward looking estimates.

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Mar-14

Apr-13

Oct-13

Jul-13

Nov-13

Sep-13

Dec-13

Feb-14

Jun-13

Aug-13

Jan-14

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Ian Brink

EXHIBIT 28: Historical and segmental contribution to Naspers revenue


Pay TV 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
2014F 2015F 2016F 2017F 2018F 2019F 2020F
To FY15 (ZAR m) 51,441 17,324 3,486 1,796

Internet

Print

Technology

2010

2011

2012

Sources: Naspers; BNP Paribas Cadiz Securities estimates

As of FY13, the internet segment overtook the pay TV segment in terms of revenue contribution. The internet and pay TV segment now contributes 45% and 38% to group revenue on an economic interest basis respectively. Based on our modelling, we expect the internet segment to grow its contribution to revenue to 58% by FY14 and 61% by FY15. Pay TV contribution we estimate at 29% in FY14 declining to 27% by FY15. Print contribution we estimate at 12% in FY14 declining to 10% by FY15. We forecast revenue growth of 80% for the internet segment in FY14 and 10% revenue growth for the pay TV segment. The changing revenue contribution profile of Naspers reflects managements sentiment of the company becoming an internet business with some good media assets.

Changes to our modelling assumptions


As we do not cover Tencent or Mail.ru, our model makes use of Bloomberg consensus estimates for Tencents revenue and EBITDA. The consensus estimates are pulled into the model in ZAR. As such, the estimates reflect both the change in consensus as well as the weakening of the domestic currency. We update our revenue estimates for Tencent and mail.ru as follows: EXHIBIT 29: Change in Associate consensus revenue and earnings
From FY14 (ZAR m) Tencent revenue Tencent EBITDA Mail.ru revenue Mail.ru EBITDA Source: Bloomberg 27,718 10,644 2,170 951 To FY14 (ZAR m) 41,635 14,844 2,998 1,538 From FY15 (ZAR m) 34,949 13,146 2,614 1,153

Earnings revision In light of our changes to our modelling assumptions, we revise our earnings as follows: Core HEPS changes FY14: ZAR24.25 to ZAR30.65 FY15: ZAR28.96 to ZAR36.33

2013

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Ian Brink

FY16: Introduce FY16 Core HEPS of ZAR41.35 Dividends We forecast dividends for Naspers as follows: FY14: ZARc 442, FY15: ZARc 535, FY16: ZARc 617 The exhibit below shows the historical and forecast dividends for Naspers. EXHIBIT 30: Historical and forecasted DPS
(DPS) 700 600 500 400 300 200 100 0 Mar 2003 Mar 2004 Mar 2005 Mar 2006 Mar 2007 Mar 2008 Mar 2009 Mar 2010 Mar 2011 Mar 2012 Mar 2013 Mar 2014 Mar 2015 Mar 2016 25 30 70 120 156 180 207 235 270 385 335 442 535 617

Sources: Naspers; BNP Paribas Cadiz Securities estimates

DCF valuation Given our changes to earnings detailed above, we employ a two-stage DCF model, based on our forecast of Naspers free cash flow to the firm (FCFF) over this period to estimate the stocks intrinsic value. Key inputs into this valuation include the following. EXHIBIT 31: DCF Valuation inputs
Stage 1 (%) Risk-Free Rate Equity Premium Cost of Debt Beta WACC Terminal Growth Rate Sources: Bloomberg; Naspers; BNP Paribas Cadiz Securities 5.5 6.0 6.0 96 10.1 Terminal (%) 8.5 6.0 9.0 96 13.0 7.0

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On this basis we arrive at a DCF valuation as follows. EXHIBIT 32: DCF Valuation Model
2014E (ZAR m) Net Income add: Non-cash charges add: After tax net interest less: Capex less: Working Capital Changes FCF PV of CFs 11,189 4,081 895 (3,542) (345) 12,279 11,477 2015E (ZAR m) 13,663 4,260 1,062 (4,136) 116 14,966 12,711 2016E (ZAR m) 15,855 4,501 1,226 (4,354) 466 17,694 13,655 2017E (ZAR m) 19,002 4,735 1,379 (4,944) 197 20,370 14,283 2018E (ZAR m) 22,651 5,022 1,514 (5,023) 76 24,238 15,442 2019E (ZAR m) 26,813 5,271 1,659 (5,501) (69) 28,173 16,309 2020E (ZAR m) 31,501 5,552 1,816 (5,945) (300) 32,624 17,160 583,408 227,794 Terminal (ZAR m)

Sum of PV CFs Less MV of Debt

328,831 (2,392) 326,439

Target Price

829.00

Source: BNP Paribas Cadiz Securities estimates

Our DCF based TP of ZAR829 is supported by our SoTP valuation of ZAR854-938. DCF remains the primary valuation methodology on which we base our recommendation. In summary, we believe that Naspers is likely to continue benefiting from Tencents strong positioning in the Chinese internet market, especially with regards to gaming, the growth in e-commerce and the ongoing adoption of mobile internet usage. We also believe that despite the increasing risk of regulatory intervention in the domestic pay tv space, which could have a negative impact on pay TV margins and potentially threaten Naspers near monopoly on premium content (especially live premium sport) that DSTV is likely to remain the dominant player in the pay TV market in SA over the medium term. Given our TP of ZAR829 and the fact that the counter is currently trading around ZAR799, it appears as though the market has already priced in the growth potential of the stock. The current implied upside of 5% lies below our BUY threshold of 10% relative to the current market price. As such, we downgrade our recommendation on Naspers from a BUY to a HOLD. Risks to our valuation Upside risks to our valuation include lower-than-expected competition in the pay TV segment, and further outperformance of Tencent and mail.ru relative to consensus. Downside risks include poorer-than-expected performance of Tencent and Mail.ru relative to consensus and more aggressive regulatory intervention in pay TV, specifically related to significant increases in local content quotas and forced implementation of wholesale content sharing.

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Appendix: Summary of model assumptions


The exhibit below summarises our revenue and EBITDA assumptions for the Pay TV segment. EXHIBIT 33: Pay TV revenue trend assumption
(ZAR m) 50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 2012 2013 2014F 2015F 2016F 2017F 2018F 2019F 2020F
Source: BNP Paribas Cadiz Securities estimates

EXHIBIT 34: Pay TV EBITDA trend assumptions


(ZAR m) 12,000 10,000 8,000 6,000 4,000 2,000 0 2012 2013 2014F 2015F 2016F 2017F 2018F 2019F 2020F
Source: BNP Paribas Cadiz Securities estimates

SA

SSA

SA

SSA

The exhibit below summarises our revenue and EBITDA assumptions for the Print Media segment. EXHIBIT 35: Print Media revenue trend assumptions
(ZAR m) 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 2012 2013 2014F 2015F 2016F 2017F 2018F 2019F 2020F
Source: BNP Paribas Cadiz Securities estimates

EXHIBIT 36: Print Media EBITDA trend assumptions


(ZAR m) 1,600 1,400 1,200 1,000 800 600 400 200 0 2012 2013 2014F 2015F 2016F 2017F 2018F 2019F 2020F
Source: BNP Paribas Cadiz Securities estimates

Media24

Abril

MIH Print

Media24

Abril

MIH Print

The exhibit below summarises our revenue and EBITDA assumptions for the Internet segment. EXHIBIT 37: Internet revenue trend assumptions
(ZAR m) 250,000 200,000
40,000

EXHIBIT 38: Internet EBITDA trend assumptions


Other
(ZAR m) 60,000 50,000 Tencent Mail.ru e-Commerce

Tencent

Mail.ru

e-Commerce

150,000 100,000 50,000

30,000 20,000 10,000 0

0 2012 2013 2014F 2015F 2016F 2017F 2018F 2019F 2020F


Source: BNP Paribas Cadiz Securities estimates

(10,000) 2012 2013 2014F 2015F 2016F 2017F 2018F 2019F 2020F
Source: BNP Paribas Cadiz Securities estimates

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Financial statements
Naspers Ltd
Profit and Loss (ZAR m) Year Ending Mar Revenue Cost of sales ex depreciation Gross profit ex depreciation Other operating income Operating costs Operating EBITDA Depreciation Goodwill amortisation Operating EBIT Net financing costs Associates Recurring non operating income Non recurring items Profit before tax Tax Profit after tax Minority interests Preferred dividends Other items Reported net profit Non recurring items & goodwill (net) Recurring net profit Per share (ZAR) Recurring EPS * Reported EPS DPS Growth Revenue (%) Operating EBITDA (%) Operating EBIT (%) Recurring EPS (%) Reported EPS (%) Operating performance Gross margin inc depreciation (%) Operating EBITDA margin (%) Operating EBIT margin (%) Net margin (%) Effective tax rate (%) Dividend payout on recurring profit (%) Interest cover (x) Inventory days Debtor days Creditor days Operating ROIC (%) Operating ROIC - WACC (%) ROIC (%) ROIC - WACC (%) ROE (%) ROA (%)
*Pre exceptional, pre-goodwill and fully diluted

2012 39,487 (20,863) 18,624 0 (11,664) 6,960 (1,222) (1,088) 4,650 (697) 3,869 0 (2,282) 5,540 (2,059) 3,481 (587) 0 0 2,894 3,370 6,264

2013 50,429 (27,852) 22,577 0 (14,956) 7,621 (1,435) (1,088) 5,098 (1,316) 9,001 0 (3,031) 9,752 (2,552) 7,199 (701) 0 0 6,498 4,119 10,618

2014E 59,029 (31,188) 27,841 0 (19,369) 8,472 (2,272) (1,310) 4,891 (1,526) 13,120 0 (500) 15,984 (4,795) 11,189 (1,163) 0 0 10,026 1,810 11,836

2015E 68,932 (36,420) 32,512 0 (22,253) 10,258 (2,477) (1,283) 6,498 (1,766) 15,286 0 (500) 19,519 (5,856) 13,663 (1,420) 0 0 12,244 1,783 14,027

2016E 79,169 (41,829) 37,340 0 (22,253) 15,087 (2,745) (1,256) 11,085 (2,000) 18,209 0 (500) 26,795 (6,795) 20,000 (1,647) 0 0 18,352 1,756 20,109

16.12 7.70 3.35

27.57 16.88 3.85

30.65 25.97 4.42

36.33 31.71 5.35

52.08 47.53 6.17

19.4 (2.6) (5.8) 7.6 (45.1)

27.7 9.5 9.6 71.0 119.1

17.1 11.2 (4.1) 11.2 53.9

16.8 21.1 32.9 18.5 22.1

14.9 47.1 70.6 43.4 49.9

44.1 17.6 11.8 15.9 37.2 20.8 13.8 43.5 28.8 41.8 87.5 17.0 14.2 10.0 2012 24,093 19,192 12,071 1,166 (17,035)

41.9 15.1 10.1 21.1 26.2 14.0 11.5 43.0 26.8 46.2 71.9 22.8 21.0 13.7 2013 28,872 34,587 11,932 1,385 (26,347)

43.3 14.4 8.3 20.1 30.0 14.4 12.7 44.6 27.3 46.7 53.5 25.1 20.1 13.1 2014E 31,778 62,211 12,441 1,454 (48,855)

43.6 14.9 9.4 20.3 30.0 14.7 13.1 40.3 27.1 42.3 57.0 27.1 19.9 13.6 2015E 34,760 78,855 13,094 1,527 (59,303)

43.7 19.1 14.0 25.4 25.4 11.9 15.3 38.7 27.3 42.7 77.5 32.5 24.0 16.5 2016E 37,477 98,054 13,782 1,603 (71,747)

Revenue By Division (ZAR m) Pay TV Internet Print Technology Less: Associates

Sources: Naspers Ltd; BNP Paribas Cadiz Securities estimates

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Cash Flow (ZAR m) Year Ending Mar Recurring net profit Depreciation Associates & minorities Other non-cash items Recurring cash flow Change in working capital Capex - maintenance Capex - new investment Free cash flow to equity Net acquisitions & disposals Dividends paid Non recurring cash flows Net cash flow Equity finance Debt finance Movement in cash Per share (ZAR) Recurring cash flow per share FCF to equity per share Balance Sheet (ZAR m) Year Ending Mar Working capital assets Working capital liabilities Net working capital Tangible fixed assets Operating invested capital Goodwill Other intangible assets Investments Other assets Invested capital Cash & equivalents Short term debt Long term debt * Net debt Deferred tax Other liabilities Total equity Minority interests Invested capital 24.65 20.02 2012 8,695 (11,004) (2,309) 8,879 6,570 21,768 0 30,659 1,281 60,278 (9,996) 1,613 13,344 4,961 1,315 4,426 47,515 2,061 60,278 39.47 35.58 2013 11,119 (14,590) (3,471) 14,056 10,585 26,194 0 35,041 792 72,612 (16,334) 2,298 20,852 6,816 1,336 8,607 53,741 2,112 72,612 40.87 32.59 2014E 12,479 (15,261) (2,782) 15,326 12,544 25,660 0 40,991 1,485 80,679 (22,307) 2,298 21,881 1,871 3,063 9,242 64,314 2,189 80,679 46.47 35.46 2015E 14,342 (16,648) (2,306) 16,985 14,679 25,126 0 47,368 1,803 88,975 (29,112) 2,298 22,961 (3,853) 3,740 9,939 76,863 2,287 88,975 61.88 49.40 2016E 16,269 (17,792) (1,523) 18,594 17,072 24,594 0 54,553 2,085 98,303 (36,534) 2,298 24,095 (10,141) 4,340 10,703 90,996 0 95,897 2012 6,264 1,222 (3,869) 5,644 9,261 97 0 (1,837) 7,521 (1,390) (1,056) (3,900) 1,175 0 114 1,289 2013 10,618 1,435 (3,875) 7,022 15,200 1,266 0 (2,767) 13,699 0 (2,046) (3,036) 8,617 0 2,010 10,627 2014E 11,836 2,272 (3,936) 5,608 15,779 345 0 (3,542) 12,582 0 (2,725) (3,364) 6,494 0 89 6,583 2015E 14,027 2,477 (4,586) 6,026 17,943 (116) 0 (4,136) 13,691 228 (3,223) (3,285) 7,411 0 (40) 7,371 2016E 20,109 2,745 (5,463) 6,501 23,892 (466) 0 (4,354) 19,072 301 (3,831) (3,286) 12,256 0 (156) 12,100

Ian Brink

* includes convertibles and preferred stock which is being treated as debt

Per share (ZAR) Book value per share Tangible book value per share Financial strength Net debt/equity (%) Net debt/total assets (%) Current ratio (x) CF interest cover (x) Valuation Recurring P/E (x) * Recurring P/E @ target price (x) * Reported P/E (x) Dividend yield (%) P/CF (x) P/FCF (x) Price/book (x) Price/tangible book (x) EV/EBITDA (x) ** EV/EBITDA @ target price (x) ** EV/invested capital (x)
* Pre exceptional, pre-goodwill and fully diluted

124 66.93

139 71.34

167 100

199 134

236 172

10.0 6.1 1.5 14.4 2012 49.6 51.4 103.8 0.4 32.4 39.9 6.5 11.9 28.7 29.7 5.2

12.2 6.6 1.6 13.5 2013 29.0 30.1 47.4 0.5 20.3 22.5 5.7 11.2 19.0 19.7 4.4

2.8 1.6 2.0 11.6 2014E 26.1 27.0 30.8 0.6 19.6 24.5 4.8 8.0 14.6 15.1 3.9

(4.9) (2.9) 2.3 11.1 2015E 22.0 22.8 25.2 0.7 17.2 22.5 4.0 6.0 12.1 12.6 3.5

(11.1) (6.6) 2.6 12.7 2016E 15.4 15.9 16.8 0.8 12.9 16.2 3.4 4.6 9.1 9.4 3.1

** EBITDA includes associate income and recurring non-operating income

Sources: Naspers Ltd; BNP Paribas Cadiz Securities estimates

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History of change in investment rating and/or target price


Naspers Ltd (NPN SJ)
Jul-09 80,151 70,151 60,151 50,151 40,151 30,151 20,151 (ZAR cts) Naspers Ltd Target Price Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 D ate 1-N ov -12 R e co B U Y TP 62,000.00

Ian.Brink started covering this stock from 01-Nov-2012 Price and TP are in local currency Valuation and risks: Upside risks to our DCF-based valuation include lower-than-expected competition in the pay TV segment, and further outperformance of Tencent and mail.ru relative to consensus. Downside risks include poorer-than-expected performance Tencent and Mail.ru and more aggressive regulatory intervention in pay TV. Sources: Bloomberg; BNP Paribas

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Disclaimers and Disclosures


ANALYST(S) CERTIFICATION
Ian Brink, BNP Paribas Cadiz Securities (Pty) Ltd, +27 21 834 3660, ian.brink@bnpparibascadiz.com. The analyst(s) or strategist(s) herein each referred to as analyst(s) named in this report certifies that (i) all views expressed in this report accurately reflect the personal view of the analyst(s) with regard to any and all of the subject securities, companies or issuers mentioned in this report; (ii) no part of the compensation of the analyst(s) was, is, or will be, directly or indirectly, relate to the specific recommendation or views expressed herein; and (iii) is not aware of any other actual or material conflicts of interest concerning any of the subject securities, companies or issuers referenced herein as of the time of this certification. Analysts mentioned in this disclaimer are employed by a non-US affiliate of BNP Paribas Securities Corp., and are not registered/ qualified pursuant to NYSE and/ or FINRA regulations.

GENERAL DISCLAIMER
This report was produced by BNP Paribas Cadiz Securities (Pty) Ltd, a member company of the BNP Paribas Group. "BNP Paribas is the marketing name for the global banking and markets business of BNP Paribas Group1. This report is for the use of intended recipients only and may not be reproduced (in whole or in part) or delivered or transmitted to any other person without our prior written consent. By accepting this report, the recipient agrees to be bound by the terms and limitations set forth herein. BNP Paribas analysts prudently perform analysis and create quantitative models and estimates derived from their own review of publicly available data without any assistance from any represented company. BNP Paribas analyst estimates and models reflect the analysts current judgment only; they are neither all-inclusive nor can they be guaranteed. The analysts analysis and models are subject to change based on various other factors. Valuations are based on internal quantitative models and qualitative interpretation. No representation or warranty, express or implied, is made that such information or analysis is accurate, complete or verified and it should not be relied upon as such. Analysts' compensation is not linked to investment banking or capital markets transactions performed by BNP Paribas or the profitability or revenues of particular trading desks. BNP Paribas analysts may participate in company events such as site visits and are prohibited from accepting payment by the company of associated expenses unless pre-approved by authorized members of Research management. This report does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Customers are advised to use the information contained herein as just one of many inputs and considerations prior to engaging in any trading activity. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy or sell any securities or other investments. This report is not intended to provide the sole basis of any evaluation of the subject securities and companies mentioned in this report. Information and opinions contained in this report are published for reference of the recipients and are not to be relied upon as authoritative or without the recipients own independent verification, or taken in substitution for the exercise of judgment by the recipient. Additionally, the products mentioned in this report may not be available for sale in certain jurisdictions. BNP Paribas is not aware of any other actual or material conflicts of interest concerning any of the subject securities, companies or issuers referenced herein as of the time of publication of the research report. As an investment bank with a wide range of activities, BNPP may face conflicts of interest, which are resolved under applicable legal provisions and internal guidelines. You should be aware, however, that BNPP may engage in transactions in a manner inconsistent with the views expressed in this document, either for its own account or for the account of its clients. Australia: This report is being distributed in Australia by BNP Paribas Sydney Branch, registered in Australia as ABN 23 000 000 117 at 60 Castlereagh Street Sydney NSW 2000. BNP Paribas Sydney Branch is licensed under the Banking Act 1959 and the holder of Australian Financial Services Licence no. 238043 and therefore subject to regulation by the Australian Securities & Investments Commission in relation to delivery of financial services. 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Any offer or sale of the securities described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevant Canadian securities regulators and only by a dealer properly registered under applicable securities laws or, alternatively, pursuant to an exemption from the dealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made. The information contained herein is under no circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient. To the extent that the information contained herein references securities of an issuer incorporated, formed or created under the laws of Canada or a province or territory of Canada, any trades in such securities must be conducted through a dealer registered in Canada. No securities commission or similar regulatory authority in Canada has reviewed or in any way passed judgment upon these materials, the information contained herein or the merits of the securities described herein, and any representation to the contrary is an offence. Hong Kong: This report is prepared for professional investors and is being distributed in Hong Kong by BNP Paribas Securities (Asia) Limited to persons whose business involves the acquisition, disposal or holding of securities, whether as principal or agent. BNP Paribas Securities (Asia) Limited, a subsidiary of BNP Paribas, is regulated by the Securities and Futures Commission for the conduct of dealing in securities, advising on securities and providing automated trading services. For professional investors in Hong Kong, please contact BNP Paribas Securities (Asia) Limited for all matters and queries relating to this report. INDIA: In India, this document is being distributed by BNP Paribas Securities India Pvt. Ltd. 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Malaysia: This report is issued and distributed by BNP Paribas Capital (Malaysia) Sdn Bhd. The views and opinions in this research report are our own as of the date hereof and are subject to change. BNP Paribas Capital (Malaysia) Sdn Bhd has no obligation to update its opinion or the information in this research report. This publication is strictly confidential and is for private circulation only to clients of BNP Paribas Capital (Malaysia) Sdn Bhd. This publication is being provided to you strictly on the basis that it will remain confidential. No part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of BNP Paribas Capital (Malaysia) Sdn Bhd.

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Singapore: This report is distributed in Singapore by BNP Paribas Securities (Singapore) Ptd Ltd ("BNPPSSL") and may be distributed in Singapore only to an Accredited or Institutional Investor, each as defined under the Financial Advisers Regulations ("FAR") and the Securities and Futures Act (Chapter 289) of Singapore, as amended from time to time. In relation to the distribution to such categories of investors, BNPPSSL and its representatives are exempted under Regulation 35 of the FAR from the requirements in Section 36 of the Financial Advisers Act of Singapore, regarding the disclosure of certain interests in, or certain interests in the acquisition or disposal of, securities referred to in this report. For Institutional and Accredited Investors in Singapore, please contact BNP Paribas Securities (Singapore) Ptd Ltd for all matters and queries relating to this report. 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Thailand: Research relating to Thailand and Thailand based issuers are produced pursuant to an arrangement between BNP Paribas Securities (Asia) Ltd and ACL Securities Co. Ltd. ACL Securities Co. Ltd. is otherwise unaffiliated with BNP Paribas. This report is being distributed outside Thailand by members of BNP Paribas. Turkey: This report is being distributed in Turkey by TEB Investment a member company of the BNP Paribas Group. Notice Published in accordance with Communiqu Regarding the Principles on Investment Consultancy Activities and the Investment Consultancy Institutions Series: V, No: 55 issued by the Capital Markets Board. The investment related information, commentary and recommendations contained herein do not constitute investment consultancy services. Investment consultancy services are provided in accordance with investment consultancy agreements executed between investors and brokerage companies or portfolio management companies or non-deposit accepting banks. The commentary and recommendations contained herein are based on the personal views of the persons who have made such commentary and recommendations. These views may not conform to your financial standing or to your risk and return preferences. Therefore, investment decisions based solely on the information provided herein may fail to produce results in accordance with your expectations. United States: This report may be distributed in the United States only to U.S. Persons who are major U.S. institutional investors (as such term is defined in Rule 15a-6 under the Securities Exchange Act of 1934, as amended) and is not intended for the use of any person or entity that is not a major U.S. institutional investor. U.S persons who wish to effect transactions in securities discussed herein must do so through BNP Paribas Securities Corp., a USregistered broker dealer and member of FINRA, SIPC, NFA, NYSE and other principal exchanges. 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1

No portion of this report was prepared by BNP Paribas Securities Corp (US) personnel and it is considered Third-Party Affiliate research under NASD Rule 2711.

IMPORTANT DISCLOSURES
The disclosure column in the following table lists the important disclosures applicable to each company that has been rated and/or recommended in this report:
Company Disclosure (as applicable) -

BNP Paribas represents that: 1. Within the past year, it has managed or co-managed a public offering for this company, for which it received fees. 2. It had an investment banking relationship with this company in the last 12 months. 3. It received compensation for investment banking services from this company in the last 12 months. 4. It beneficially owns 1% or more or the market capitalization of this company. 5. It makes a market in securities in respect of this company. 6. The analyst(s) or an individual who assisted in the preparation of this report (or a member of his/her household) has a financial interest position in securities issued by this company or derivatives thereof. 7. The analyst (or a member of his/her household) is an officer, director, or advisory board member of this company. Additional Disclosures Within the next three months, BNP Paribas may receive or seek compensation in connection with an investment banking relationship with one or more of the companies referenced herein. Target price history, stock price charts, valuation and risk details, and equity rating histories applicable to each company rated in this report is available in our most recently published reports available on our website: http://eqresearch.bnpparibas.com, or you can contact the analyst named on the front of this note or your BNP Paribas representative. All share prices are as at market close on 18 July 2013 unless otherwise stated.

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RECOMMENDATION STRUCTURE
Stock Ratings Stock ratings are based on absolute upside or downside, which we define as (target price* - current price) / current price. BUY (B). The upside is 10% or more. HOLD (H). The upside or downside is less than 10%. REDUCE (R). The downside is 10% or more. Unless otherwise specified, these recommendations are set with a 12-month horizon. Thus, it is possible that future price volatility may cause a temporary mismatch between upside/downside for a stock based on market price and the formal recommendation.
* In most cases, the target price will equal the analyst's assessment of the current fair value of the stock. However, if the analyst doesn't think the market will reassess the stock over the specified time horizon due to a lack of events or catalysts, then the target price may differ from fair value. In most cases, therefore, our recommendation is an assessment of the mismatch between current market price and our assessment of current fair value.

Industry Recommendations Improving ( ): The analyst expects the fundamental conditions of the sector to be positive over the next 12 months. Neutral ( ): The analyst expects the fundamental conditions of the sector to be maintained over the next 12 months. Deteriorating ( ): The analyst expects the fundamental conditions of the sector to be negative over the next 12 months. Country (Strategy) Recommendations Overweight (O). Over the next 12 months, the analyst expects the market to score positively on two or more of the criteria used to determine market recommendations: index returns relative to the regional benchmark, index sharpe ratio relative to the regional benchmark and index returns relative to the market cost of equity. Neutral (N). Over the next 12 months, the analyst expects the market to score positively on one of the criteria used to determine market recommendations: index returns relative to the regional benchmark, index sharpe ratio relative to the regional benchmark and index returns relative to the market cost of equity. Underweight (U). Over the next 12 months, the analyst does not expect the market to score positively on any of the criteria used to determine market recommendations: index returns relative to the regional benchmark, index sharpe ratio relative to the regional benchmark and index returns relative to the market cost of equity.

RATING DISTRIBUTION (as at 19 July 2013)


Total BNP Paribas coverage universe Buy Hold Reduce 659 348 209 102 Investment Banking Relationship Buy Hold Reduce (%) 5.5 1.4 2.9

Should you require additional information concerning this report please contact the relevant BNP Paribas research team or the author(s) of this report. 2013 BNP Paribas Group

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